ADB: Philippine economy to remain strong

MANILA, Philippines - The Philippine economy is seen to expand by 6.4 percent this year and 6.7 percent in 2015, the Asian Development Bank (ADB) said in its flagship annual economic publication titled 'Asian Development Outlook 2014.'

The multilateral financial institution said the country is expected to sustain its strong growth on the back of an improving business climate and rising investment.

"While growth is forecast to slow from a very strong 2013, the economy will continue delivering well above its recent average growth rate this year. The key challenege is to find ways to turn this strong performance into employment that will help to further reduce poverty and support inclusive growth," ADB's Deputy Chief Economist Juzhong Zhuang said.

The report said the multiple investment grade sovereign credit ratings and gains in global competitiveness in 2013 are expected to support growth in investment. The report also sees positive business sentiment and increasing foreign direct investments in the Philippines.

Private consumption, which rose by 5.6 percent last year and accounted for more than half in the economic expansion, is also seen to benefit from remittance inflows and positive consumer sentiment.

The report said the manufacturing sector will improve due to strong domestic demand and improvement in exports. Construction will similarly improve with the government's expansion of its 2014 budget for infrastructure to 3 percent of gross domestic product. Expansion of the business process outsourcing industry and the tourism sector will also support growth in the services sector, which accounted for 57 percent of the economy in 2013.

On the other hand, the report said higher inflation and interest rates will likely temper the growth rate in consumer spending. The economic benefits of rehabilitation and reconstruction in rural areas will not be felt until late 2014 and 2015, it added.

The report said job creation remains a critical challenge for the government, with nearly 3 million people unemployed and 7 million underemployed.